ICICI Securities
Bharti Airtel (Buy)
Target: ₹723
CMP: ₹526.45
Bharti Airtel (Bharti) has announced a new corporate structure wherein digital assets, and infrastructure assets (fibre and tower [via Nettle Infrastructure]) will be pushed up into the parent entity, and telecom business will be pushed down to the wholly-owned subsidiary.
The new structure is aimed at bringing all digital assets under one entity and focusing on growing it fast and by pushing telecom business at bottom, it will make the entire organisation AGR-tax efficient.
Clearly, the new structure indicates no immediate monetisation plans of digital assets, and rightfully so, as it is yet to exploit the potential from the business.
However, in future, when business becomes large, it can always restructure efficiently to monetise the digital asset.
The new structure ensures digital business is not exposed to any licence fees and spectrum usage charges liabilities in future. Telecom business is housed in a separate entity with no non-telecom business as subsidiary, thus making it AGR-tax efficient.
Bharti had digital assets sitting in multiple entities and thus, it was missing a united push and an opportunity to cross-sell services. A separate digital entity is expected to bring focus to business and united efforts are intended at sharping the execution.